Clock ticks for China's demographic challenge (2)

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Clock ticks for China's demographic challenge (2)

(Xinhua) 15:48, November 20, 2013

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ECONOMIC CALCULUS

"China's population used to provide a cost advantage to compete globally, but it is turning into a liability," said Ba Shusong, a researcher with the Development Research Center of the State Council, a government think tank.

Ba added that China is approaching the Lewis turning point, which marks a watershed from abundant labor supply to a shortage.

If an aging society is not properly addressed it will drag the country into an economic recession currently plaguing the European Union and Japan, researchers warn.

"This is a wake-up call for China, where the population is rapidly aging," said Zhang Monan, a researcher with think tank State Information Center.

Demographic changes have emerged as a factor policy makers cannot afford to ignore when charting economic development in the next decade. According to statistics from the National Bureau of Statistics, China's working population started to fall in 2012.

The shrinking pool of working-age Chinese people is cutting deep into China's traditional advantage in labor cost, which is credited for having fueled the nation's export-oriented growth over the past three decades.

Factories are reporting difficulties in hiring. Some factory managers say each year they have to raise salaries by 10 to 15 percent to hire workers. Multinational firms such as Adidas and Nike have relocated their production bases to southeast Asia, where wages are relatively lower.

Impact is also felt at the consumption end. Labor-intensive manufacturing is pushing up prices of consumer staples from vegetables to clothes.

AGING MORE SLOWLY

Despite the government's all-out efforts to tackle the demographic challenge, experts say these reforms are unlikely to buck the aging trend.

"In the past when we were trying to curb population growth, developed economies were using policy and economic tools to stimulate growth, but to very limited effect," said Yuan Xin, a demographer with Nankai University.

According to Yuan's estimate, China will add 50 million people in the next two to three decades with the relaxed policy in place.

Wang Pei'an, Vice Minister of National Health and Family Planning Commission, said that the total number of couples eligible for giving birth to a second child is low.

He added that with provinces yet to work out their own timetable to ease the one-child policy, China is unlikely to see a baby boom in the near term.

So far the consensus is that these policies will slow down the speed at which China's population ages.

This will give policy makers more time to map out a comprehensive plan to deal with the rising cost of caring for elderly citizens and gear its economy from the labor-intensive model to a high value-added one.

"It takes time for new-borns to enter the labor market," said Zhang Chewei, a demographer with Chinese Academy of Social Sciences. "The ultimate cure for the labor shortage is to develop technology and enhance productivity."